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Money laundering: Council approves strengthened rules

The Council on 20 April 2015 adopted its position at first reading on new rules aimed at preventing money laundering and terrorist financing.

The directive and regulation will strengthen EU rules against money laundering and ensure consistency with the approach followed at international level. The regulation deals more specifically with information accompanying transfers of funds.

The decision will enable the European Parliament, with which agreement was reached on 16 December 2014, to adopt the package at second reading at a forthcoming plenary session.

International recommendations

The texts implement recommendations by the Financial Action Task Force (FATF), which is considered a global reference for rules against money laundering and terrorist financing. On some issues, the new EU rules expand on the FATF's requirements and provide additional safeguards.

The strengthened rules reflect the need for the EU to adapt its legislation to take account of the development of technology and other means at the disposal of criminals. The main elements are:

Extension of the directive's scope, introducing requirements for a greater number of traders. This is achieved by reducing from €15 000 to €10 000 the cash payment threshold for the inclusion of traders in goods, and also including providers of gambling services;

Application of a risk-based approach, using evidence-based decision making, to better target risks. The provision of guidance by the European supervisory authorities;

Tighter rules on customer due diligence. Obliged entities such as banks are required to take enhanced measures where the risks are greater, and can take simplified measures where risks are demonstrated to be smaller.

Supranational risk assessment

The importance of a supranational approach to risk assessment has been recognised at international level. The Commission has been entrusted with the responsibility of coordinating the assessment of money laundering and the risk of terrorist financing that affect the internal market and relate to cross-border activities.

Beneficial ownership

The package includes specific provisions on the beneficial ownership of companies. Information on beneficial ownership will be stored in a central register, accessible to competent authorities, financial intelligence units and, as part of customer due diligence, obliged entities such as banks. The agreed text also enables persons who can demonstrate a legitimate interest to access at least the following stored information:

name,

month and year of birth,

nationality,

country of residence,

nature and approximate extent of the beneficial interest held.

Member states that so wish may use a public register. As for trusts, the central registration of beneficial ownership information will be used where the trust generates consequences as regards taxation.

Gambling

For gambling services posing higher risks, the adopted legislation requires service providers to conduct due diligence for transactions of €2000 or more. In proven low-risk circumstances, member states may exempt certain gambling services from some or all requirements, in strictly limited and justified conditions. Such exemptions will be subject to a specific risk assessment. Casinos will not benefit from exemptions.

Traceability of fund transfers

The full traceability of fund transfers can be of particular importance in the prevention, detection and investigation of money laundering and terrorist financing. While existing legislation already requires payment service providers to accompany transfers of funds with information on the payer, the new rules will also require information on the payee to be included. Under the new rules, the European Banking Authority, the European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority will be asked to issue guidelines addressed to competent authorities and payment service providers on measures to be taken when they receive transfers of funds with missing or incomplete information on the payer or the payee.

Sanctions

As concerns sanctions, the text provides for a maximum pecuniary fine of at least twice the amount of the benefit derived from the breach or at least €1 million. For breaches involving credit or financial institutions, it provides for:

a maximum pecuniary sanction of at least €5 million or 10% of the total annual turnover in the case of a legal person;

a maximum pecuniary sanction of at least €5 million in the case of a natural person.

Next steps

Member states will have two years to transpose the directive into national law. The regulation will be directly applicable.

The regulation and directive were adopted without discussion at a meeting of the Agriculture Council.

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